Dear Mary, I started a local restaurant with my friend and business partner a few months ago and we both agreed to sign non-compete agreements, prohibiting us from opening restaurants in Napa for the next two years.

Now we’re fighting and I want to start a new restaurant on my own (serving the same kind of food). I’ve heard that non-competes are not legal in California . Can I go start my own restaurant?

Probably not. The truth is, you’re correct that non-competes are generally void in California, but there are a couple of exceptions to that rule and I think your situation may fall into one of them.

A non-compete contract is an agreement in which one party agrees not to engage in a similar profession or trade in competition with the other party. Employers often have employees sign non-competes when they are worried that the employee, upon termination, might start working for a competitor or start their own business in the same field, and use confidential information or trade secrets to gain a competitive advantage.

In California, non-competes are generally unenforceable under Section 16600 of the Business and Professions Code. There are two very narrow exceptions to this general rule:

1) A non-compete agreement may be enforceable if it’s made in connection with the sale of the goodwill of a business. An example would be when a person sells a business and agrees to refrain from carrying on a similar business in the same geographic area.

The thinking behind this is that it would be inherently unfair for someone to sell a company and then engage in competition that decreases the value of the asset they just sold.

2) Non-competes may be enforceable when it comes to dissolving a business (or dissociation of a partner from a business). A partner may be required to agree not to carry on a similar business within a geographic area where the partnership is located or has done business, so long as any other member of the partnership carries on a like business.

The reasoning behind this exclusion to the general rule against non-competes is that this kind of agreement gives all partners the opportunity to start anew in business on equal terms.

Non-competes are often used to protect trade secrets. A company can prevent the use of its trade secrets, but it may not prevent fair competition.

A good example is a customer list: a company can prevent a former employee from soliciting clients by using their customer list, but merely informing those customers that the former employee has a new job (without more) is OK.

An employer and an employee cannot agree that a non-compete is valid. If the contract is determined to be void by law and public policy, it cannot be made valid by agreement.

An employee or potential employee cannot legally be terminated (or not hired) for refusing to sign a non-compete. However, many employees agree to sign non-competes, knowing that the agreement is invalid, just to ensure they are hired (or not fired).

Mary Hudson is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.

Dear Mary, Last year, my business paid to advertise in a sustainability magazine. I gave a credit card deposit for advertising design and placement within the publication. Unfortunately, we didn’t read the contract fully or ask enough questions before signing it. The magazine never came out and our ads never ran — but our credit card was charged over a thousand dollars. How do I know if I’m being scammed and how can I protect myself from future scams?

People often talk about identity theft and the importance of protecting yourself, but many businesses forget to protect themselves from scams. Your situation last year illustrates how important it is to investigate offers and review contracts carefully. You’re not alone—at least seven businesses in Napa reported that magazine scam to the district attorney’s office.

Business scams come in many forms. Some involve bills for advertising or directory listings that were never ordered, suspicious office supply offers, and even false demands from imaginary government agencies.

Here are some common scams to watch for:

• Advertising scams: Small businesses are often deceived into paying for an advertisement or directory listing that does not exist. A scammer might call your business to confirm an advertisement they claim you ordered. They may even quote a genuine ad you placed in a different publication to convince you. When you refuse to pay, they threaten legal action.

• Check overpayment scams: You’re selling something on the Internet, through eBay, Craigslist, etc., and the scammer sends you a check for more than the price. They’ll say there was a mistake and they’ll ask you to refund the excess amount by wire transfer. You wire them the difference and when you go to cash their check (surprise, surprise) it bounces.

• Office supply scams: You get a bill for office supplies you never ordered, never received, or for items that were not what you thought you bought. Often, this scam comes in the form of a phone call from someone claiming to be your regular supplier. Watch for offers of a free gift, which arrives with other goods that were not ordered, for which you will be charged.

• Fax back scams: You receive an unsolicited fax offering a great deal — all you have to do is fax back to a $5/minute telephone number. They’ll make sure your fax goes through — slowly.

• Government scams: When I file articles of organization for an LLC, I receive a very official-looking document from the “Office of the Compliance Recorder” (fake) telling me that if I don’t send them a check for $150 and fill out the “Annual Minutes Disclosure Statement” (also fake), my company will lose limited liability protection (fake). And if I pay $200, they’ll give me immediate processing!

Don’t be a victim. Never give financial details to anyone you don’t trust. Implement clear policies about who is authorized to pay bills or place orders. Most importantly, do not sign anything until you read and understand all of the terms.

If you believe you’ve been scammed, you can fill out a complaint form with the Napa district attorney’s office at countyofnapa.org, or contact their Consumer Affairs Hotline: 253-4059.

Mary Hudson is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.

When you start a new business partnership, there’s a period of time when everything is exciting and nothing can go wrong. This honeymoon period can come to an end when you realize you’re no longer on the same page. Then what?

A partnership agreement is a simple and clean way to protect your business and your relationship. This document can structure everything from your rights and responsibilities to what happens when a partner leaves. Each state has its own default partnership law that controls absent an agreement, but your own agreement will give you some specialized guidelines and flexibility.

Here are some things to consider:

• How much money will each partner contribute? Determine each partner’s share of the profits and losses before there are any. If you can afford to pay for computer parts and your partner cannot, are you going to want more of the profit? If you do all the work and your partner contributes money, should the disbursements be equal? How will you value “sweat equity”? What if the business folds? What if you agree to provide equal startup capital, but your partners don’t pay their share? It can be uncomfortable to talk about these issues, but it’s worse when partners have a falling-out without answering these questions. Get it in writing now and avoid the headache.

• Are you a “numbers” person? If you’re not, or you’re uncomfortable with the idea of having your partner controlling the money, do yourself a favor and hire an accountant. Decide what your fiscal year will be and what accounting method you will use.

• Make sure the partnership keeps proper and complete accounts of its business at its main office. Also, confirm that your agents and attorneys have access to the records.

• Who will participate in the control, management and direction of your business? If you disagree with your partner, how will you make a decision in case of a deadlock? Some businesses have one partner who will make “creative” decisions and another who will make “business” decisions. If you do that, make sure you clearly define what constitutes “creative” or “business.”

• What if your partner wants to be involved in another business, like starting a consignment store? What if that consignment store starts selling computer equipment and offers installation and maintenance? Protect yourself from an awkward disagreement by discussing whether a partner can be involved in another competing business.

• What happens if someone wants to join the partnership? Can a partner sell or gift their partnership interest? What if your partner gives their interest to someone you dislike? Should you have the option of buying them out? What if one of you dies — does the business go to the remaining partner, or to the partner’s estate?

Partnership agreements should fit a partnership’s particular needs. If you are serious about starting a business, have the tough conversations now.

Mary Hudson is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.

Dear Mary, I own a retail store in Napa and employ several sales associates. Some of my employees use the office computer when I’m away and get on Facebook. Recently one of them forgot to sign out and I looked through her profile and discovered that last week when she had called in sick, she was actually shopping with friends. The associate is now claiming I invaded her privacy. Was it OK for me to look at her profile?

The California constitution expressly provides that all persons have a right to privacy — or the right to be left alone. Although the right to privacy is fundamental, it’s not an absolute right. Generally speaking, some intrusion of privacy by an employer will be allowed if it’s justified by a compelling interest. A court would use a balancing test to determine whether your actions were constitutional.

The first step is to determine whether your employee had a personal and objectively reasonable expectation of privacy that you infringed.

There are several factors to consider — is her Facebook profile accessible to the public, or do her privacy settings limit access to her “friends”? Are you friends with her on Facebook? Does she regularly use the office computer? Was the information on her profile or her friend’s profile? If it was on her friend’s profile, is that profile public or private?

The key here is to focus on objective, rather than subjective standards. The question is whether a “reasonable person” in her situation would expect their boss to look at their Facebook profile, not whether she would expect you to do so.

The next question would be whether your conduct was reasonable under the circumstances, or simply, whether you had a really good reason for what you did. If you knew that she had been using the office computer, knew she hadn’t logged out of Facebook, and wanted to snoop, your actions were likely unreasonable.

On the other hand, if her profile was open on the computer and you wouldn’t have been able to use the computer without seeing it, that’s a different situation. You have a legitimate business need to use your computer and if her Facebook profile happens to be up, that’s not your fault.

It’s difficult to protect your privacy at work, especially if you work in a busy retail environment with a constant stream of customers.

The moral of the story is that employees shouldn’t put anything on Facebook that they wouldn’t want their boss (or anyone else, for that matter) to see. Facebook is forever.

Business owners should create clear policies about employee privacy. When an employer has a regular policy of inspecting or monitoring an employee’s Internet use, it’s reasonable to assume that an employee is not going to have a legitimate expectation of privacy in their Internet use.

Such a policy should be clear, easily understood, and administered fairly. It should be in the employee handbook, posted as a notice, or otherwise publicized.

Mary Hudson is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.

I have an idea for a new business selling cookies made from my grandmother’s recipe. How can I find out if someone else is already selling cookies under the name I want to use? How can I protect my cookies — and my grandmother’s recipe?

Ideas (and cookies) are very important to businesses. The law protects intangible assets like names, labels and recipes in various ways.

Let’s start with trademark protection. Trademark law protects company and product identities and brands. Examples of things that may be trademarked are words (“The Napa Valley Register”), logos (the McDonald’s golden arches), pictures, slogans (“Just do it”), colors (the pink color of Owens-Corning fiberglass insulation), product shapes (the unique shape of a Coca-Cola bottle), and sounds (the NBC chimes).

In your case, you would want to register the name of your cookies for trademark protection. First, you need to do a trademark search and what I call a “common sense search.” Google your proposed cookie name and see what comes up. If you see other cookies, you’re in trouble. If you see other things with the same name that have nothing to do with cookies, you might be okay. Is the domain name available?

Next, you’re going to do a search on the Trademark Electronic Search System (uspto.gov) to make sure the name is available. If you have a word, phrase, symbol or design that identifies and distinguishes the source of the goods of one party from those of others, and it’s not already taken, you can apply online for a trademark on the U.S. Patent and Trademark Office (USPTO) website starting at $275 per international class.

If you haven’t actually started selling your cookies yet but intend to, you can file what’s known as an “intent to use” application. Once you start selling your cookies, you can submit a “statement of use” showing that you are now using the mark in commerce. An intent to use application can be extended every six months for up to a total of three years.

Technically you do not need to register your mark to have the right to use your mark in commerce — in other words, you don’t actually need a trademark to sell your cookies. However, registering provides many advantages, including public notice of your ownership of the mark. The law makes a presumption that if you have a registered mark you have the exclusive right to use the mark. So if you start selling your trademark-protected cookies and a few years from now someone tries to sell cookies with the same name (or a confusingly similar name), you can make them stop using your name.

Keep in mind that if you have a trademark, it is up to you — and only you — to make sure no one else is using the mark. The USPTO does not enforce your rights in the mark.

Now let’s talk about trade secrets and your grandmother’s recipe. Trade secret law protects proprietary information that can be maintained as secret. Examples of trade secrets include formulas (like the recipes for Coca-Cola and KFC chicken), plans and designs, and processes. A trade secret must be valuable to the business and must actually be kept secret. To protect your grandmother’s recipe, do NOT share it with anyone. When it comes to sharing it with employees, consider using non-disclosure and non-compete agreements.

Intellectual property law is complicated. If your cookies really are the best around, you may want to hire an attorney to help you navigate these muddy waters.

Mary Hudson is a business law attorney with Hudson & Luros, LLP, in Napa, and can be reached at mary@hudsonluros.com or 418-5118. The information provided here is not intended as legal advice, nor does it form an attorney-client relationship with the author. The author makes no representations as to the reliability or accuracy of the above information. In a perfect world we wouldn’t need disclaimers — or attorneys.